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Month: March 2014

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In my previous post, I juxtapose the enactment of the Affordable Care Act (“ACA” or “Obamacare”) against the backdrop of Hans Christian Andersen’s “The Emperor’s New Clothes.” This article will take this analysis a bit further.

You may recall that when the emperor was parading through his city, he recognized that he was naked. In fact, he “shivered, for he suspected they were right.” Still, he reasoned that the parade had to go on. “So he walked more proudly than ever, as his noblemen held high the train that wasn’t there at all.”

It is truly amazing how closely this story parallels with how President Obama and the Democrats are reacting to the utter catastrophe that is the ACA.

In some respects, it is patently obvious that the President understands that the Titanic is sinking. Still, at other times its almost as if “Captain” Obama is directing the ship’s orchestra to continue playing their songs while everyone else jumps into the icy North Atlantic waters.

First, let’s go back to September 27, 2013. Just a few days before Healthcare.gov began operations, the White House issued a video presentation explaining the essential bullet points of the ACA. I have linked to it here.

Let’s go to the tape…. (Boy that dates me, doesn’t it?)

Ten seconds into the presentation, the voice-over actress (who sounds like Janeane Garofalo, minus about 20 years of cigarette smoking) promises:

Obamacare means you get a host of new benefits and protections. For example, insurance companies are now required to cover women’s wellness visits, mammograms, birth control for women, immunizations for kids — all without charging you a penny more. That means no extra co-pays or fees. Young adults can now stay on their parents’ plan until they turn 26. Insurance companies can’t limit the amount of care they’ll cover over your lifetime. Also, if your insurance company spends more than 20% of your premium dollars on overhead — stuff like CEO salaries, marketing, or administrative costs — they have to send you a refund for the difference.

In January [2014] that list of benefits gets even longer. It will be illegal to charge you higher premiums or refuse coverage because you get sick or have been in the past. Charging women more than men for the exact same coverage — also illegal. No more deciphering page after page of jargony paperwork from your insurance company to determine what they will or won’t cover. Instead, you will get a short, plain language summary of your benefits and coverage. Easy right? …

Let’s stop right here and examine this line-by-line….

Obamacare means you get a host of new benefits and protections.

Right off the bat, the White House is putting its best foot forward. (After all, who doesn’t want new benefits or protections?) Moreover, since this sentence uses the word you without restriction or modification, one can safely assume that you means any person eligible for insurance under the ACA. As such, this sentence necessarily implies that every U.S. citizen — all 313 million of us — are going to enjoy a hostof new benefits and protections.

That’s a lot of benefits. That’s a whole bunch of protections. But how does the government provide all these goodies to all these people? (Oh, but I am jumping ahead!)

Next line …

For example, insurance companies are now required to cover women’s wellness visits, mammograms, birth control for women, immunizations for kids — all without charging you a penny more. That means no extra co-pays or fees.

In a complete vacuum, all of us want women to have wellness visits and mammograms. Although I recognize that many people — particularly Catholics — have moral objections to birth control, I suspect that most Americans use some form of contraceptive planning; thus, I suspect that most Americans would be thrilled to have birth control covered on insurance. As for immunizations, many Americans are opposed to them out of concern for possible side effects (such as autism), but again, I suspect that most Americans believe immunizations are good things. Thus, from a purely political standpoint, these promises are like chocolate cake being offered to a herd of hypoglycemic 6-year-olds. They are “goodies” that almost everybody wants.

Moving back to the text … To say that “insurance companies are now required” to provide these services implies that insurance companies were not required to provide these services before the ACA was enacted. (Does this not make sense? Why mandate something that everyone is already doing?) Thus, it is apparent that insurance companies are now going to provide certain new — and rather expensive — services to women and children.

Unfortunately for insurance companies, they must now provide these services without “charging you one penny more.”

Deficits are created when more money goes out than what comes in. When insurance companies have deficits, they lose cash reserves. When insurance companies lose cash reserves, they lose their insurance ratings, (e.g., A++, A+, etc., etc.). When insurance companies get downgraded, oftentimes the state insurance regulators appoint receivers to handle their finances. If a company doesn’t survive receivership, it goes under.

Of course, let’s get real… Mammograms and birth control pills are not going to put Blue Cross/Blue Shield out of business. Certainly, Aetna can afford to pay for little Tommy’s measles shot without having to file for Chapter 11 bankruptcy protection. Right?

Let’s move on …

Young adults can now stay on their parents’ plan until they turn 26. Insurance companies can’t limit the amount of care they’ll cover over your lifetime. Also, if your insurance company spends more than 20% of your premium dollars on overhead — stuff like CEO salaries, marketing, or administrative costs — they have to send you a refund for the difference.

Putting aside the question of whether it is befitting young adults to stay on their parents’ health insurance plans, let’s look at the implication. Why would any 26-year-old want to still be on his parents’ plan? If it’s not any cheaper, then there would be no benefit. Thus, for this to be a benefit, it must save the young adult money. Of course, if the young adult saves money, is this not at the expense of the insurance company’s bottom line?

The same goes with the abandonment of lifetime limits for treatment. Obviously no one wants to have his health insurance dropped because the insurance company has spent too much money on him. That certainly appears to be a benefit to the consumer. However, with these limits thrown out, the ability for insurance companies to reduce their losses is greatly diminished. So again, even though the consumer is getting a good deal, the insurance company is taking a big hit with this.

Of course, the pièce de résistance is that insurance companies cannot spend more than 20% of their income on overhead. On paper, this looks great, does it not? The government is telling insurance companies that if they spend more money than they really need to operate — and, of course, the government knows exactly what insurance companies really need to operate — they are going to have to refund the difference to you and me.

In fairness to the government, it has been argued that Medicare spends only 1% – 6% of its budget on administrative costs. Perhaps this explains why the Medicare Secondary Payer Recovery Center, in particular, is the worst run agency in Washington. (Nota bene: The MSPRC is responsible for placing liens on personal injury claims involving Medicare recipients. In order for the Medicare recipient to receive compensation, the MSPRC must first calculate how much the government is entitled to collect from the proceeds. I once had a client who had to wait 5 months for the MSPRC to calculate a $400.00 lien. I had to call MSPRC at least once a week, and wait on hold for at least an hour each time. It wasn’t until I threatened to call my Congressman that they gave me a straight answer.)

The fact remains that all of these benefits — and I suppose the cap on overhead would be considered a “protection” — are going to cost insurance companies a prodigious amount of money. Not only are they required to provide more services — they are going to have to provide these services using less resources for overhead.

And we haven’t even gotten to the requirements that went into effect on January 1, 2014.

In January [2014] that list of benefits gets even longer. It will be illegal to charge you higher premiums or refuse coverage because you get sick or have been in the past. Charging women more than men for the exact same coverage — also illegal. No more deciphering page after page of jargony paperwork from your insurance company to determine what they will or won’t cover. Instead, you will get a short, plain language summary of your benefits and coverage. Easy right? …

On top of all that we have already discussed, the insurance company cannot charge you more because you are — or have been — sick.

So think about this. A person with no health insurance becomes diagnosed with cancer. Treatments are going to cost tens of thousands of dollars, if not hundreds of thousands of dollars. So what does the patient do? He purchases health insurance — while he is sick — in order to pass the large bill along to the rich insurance company. So everyone who is sick is going to be purchasing health insurance because the premium will invariably be less than the cost of treatment. (Even President Obama agrees.)

Nobody wants to spend money on health insurance until they get sick.

Yet again, the insurance company gets soaked.

As one who suffered from a life-threatening illness as a child, I can sympathize with anyone who is unable to pay his medical bills. I know my sickness set my parents back a princely sum. But the fact remains that insurance companies can only take so much burden before it must pass the costs back to the consumer.

Medicare may be a charity. Blue Cross/Blue Shield isn’t.

At any rate, anybody with a 5th grade education should have realized that one cannot get a host of benefits and protections for free. Even a child could have noticed that these clothes don’t dress. Yet, Americans were surprised — outraged — when they learned that their insurance premiums were going to jump by several hundred percent.

Despite this, like the emperor from the story of old, President Obama is lifting his head up, walking down the street naked, while Nancy Pelosi and other liberal Democrats are holding his train. Listen to what the President said to Zach Galifianakis just last week. (Start at 3:58.)

… that you can get affordable health care. And most young Americans, right now, they are not covered. And the truth is that they can get coverage all for all that costs you to pay your cellphone bill.

The President knows that for the ACA to work, young Americans are going to have to pump hundreds of millions of dollars into the exchanges to support everyone else. But the President also knows that young people aren’t going to buy health insurance until they get sick. (And why should they if they are going to stay on their parents’ coverage?) So, the President is in pickle.

Fortunately for the President — and everyone else — this will become someone else’s problem on January 20, 2017.

But in the meantime, if you see a scantily-clad chief executive bandying about the streets of Washington trying to sell over-priced health insurance, you will understand why.

Like this:

In 1837, Hans Christian Andersen published “Keiserens nye Klæder” (i.e., “The Emperor’s New Clothes”). In 1949, Jean Hersholt translated the story into English. (This translation can be viewed here.)

This story is about an emperor who was obsessed about his appearance — to the complete detriment of his regal duties. The emperor spent all of his money on fine apparel. Instead of meeting with his advisers, he spent most of his time in his dressing room. To the emperor, image was everything.

One day, a pair of swindlers came to town. Claiming to be weavers, the duo offered to “weave the most magnificent fabrics imaginable.” They claimed that these fabrics “had a wonderful way of becoming invisible to anyone who was unfit for his office, or who was unusually stupid.” Wanting to discern which of his advisers were wise and which were fools, the emperor immediately put the pair to work. They, in turn, set up their imaginary looms and proceeded to weave their imaginary cloth.

While the men were at work, the emperor sent two of his advisers — one right after the other — to check on the progress. Neither adviser could see the cloth. However, both advisers recognized that they would be branded unfit for office or downright stupid if they were to say as much to the emperor. So they both praised the “attire” when the emperor came to see the progress. (Of course, the emperor couldn’t see the clothes either, but like his advisers, he didn’t want to appear stupid; so he followed suit by praising the “suit” the swindlers were making.)

Eventually, the emperor donned his new “attire” and went out in public, with a large entourage of noblemen by his side. The noblemen couldn’t see the clothes, either. However, they also didn’t want to appear stupid. So they pretended to hold the emperor’s imaginary train as he walked in front of them.

Finally, a little boy, who was not afraid of making a scene, stated the obvious fact that everyone else was trying to ignore: The emperor was naked.

After the boy had made his declaration, people began to whisper. Soon, the entire crowd started thinking that this innocent boy was telling the truth. Even the emperor began to think so, but by then he was in too deep. Believing that the procession had to go on, the emperor “walked more proudly than ever, as his noblemen held high the train that wasn’t there at all.”

In a political context, this story is accurate on so many different levels.

In a world where news is reported instantly — 24 hours a day, every day — politicians must maintain control of the narrative in order to survive. In this information age, perception is more important than reality.

For example, it doesn’t matter what a piece of legislation actually says; the only thing that matters is what people believe it says. Likewise, it doesn’t matter what a politician actually does for his constituents; the only things that matter are his stated intentions.

In effect, most — albeit not all, but most — politicians are simply playing a role. They are merely actors. They stand on the stage and mouth lines that are handed to them by lobbyists, pollsters, and party bosses. Like all actors, they must “dress” the part; they must wear the finest “attire;” they must appear magnificent. Otherwise, if they look the wrong way or say the wrong lines or miss the wrong photo-op, they won’t get elected. So like the emperor, the typical politician is always looking for an “outfit” that makes him look more resplendent than he really is.

Of course, this makes politicians most susceptible to the cunning wiles of swindlers.

Case in point: Let’s look at how the Affordable Care Act (“ACA”) was enacted into law. You may recall that then-Speaker Nancy Pelosi said:

We have to pass the bill so that you can, uh, find out what is in it, away from the fog of the controversy.

I did a cut-and-paste of the ACA from this location. By my word-processor’s count, the ACA has 379,857 words. That’s about 1/2 the length of the King James Version of the Bible.

How absurd was it for Speaker Pelosi to say that we can’t read a bill — half as long as the Bible — until after we pass it!

Imagine if a lawyer were to tell his client, “You can’t read this contract I am preparing for you until after you sign it.” Likewise, what if a doctor were to tell a patient that he had to consent to surgery before he could learn where he was to be cut? At the very least, that would be gross negligence. At worst, it would be outright misrepresentation.

The ACA was the “outfit” that Democrats had been bragging about for months. It was the magnificent piece of cloth that had been woven by the liberal think-tanks. It promised to cure all of our ills — pun intended, thank you: Everybody would now have access to health care, at lower costs. No longer would preexisting conditions or other exclusions keep a person from the doctor of his choice. The ACA was going to fix all of these problems, and everybody would be happy.

Those who objected to the ACA — in particular, the Republicans (or anyone else who wanted to read the bill before voting) — were treated like they were unfit for office or stupid. How dare they insinuate that “Emperor” Obama wanted to purchase an “outfit” that left nothing to the imagination!

What the ACA said didn’t matter. What mattered was that the Democrats were trying to fix the problem. The appearance of doing good was more important than anything else. So for the Democrats to get the credit for fixing our healthcare woes, the ACA had to be passed “away from the fog of controversy.”

That was 4 years ago. We now know the mess that the ACA has created. (I won’t get into that right now; I will save it for a later post.) Suffice it to say, if there had been a bit more of a “fog of controversy,” perhaps we wouldn’t be in the mess we now find ourselves.

This brings me to the point of my whole blog. I will ask the tough questions; I will point out the obvious inconsistencies; I will stir up a “fog of controversy.”

If our politicians are too afraid to address the substance of the issues of the day, then I will do it for them.